Archive for July, 2008
Just how accurate is the Case Schiller home index for San Diego
July 31st, 2008 Categories: Real Estate News, San Diego County Community News, San Diego County Fixer of the Week
SAN DIEGO– It was reported that the most recent Standard & Poor’s/Case-Schiller index showed a a one year price decline in San Diego of 23.2%. This ranked San Diego fifth worse of the 20 metro areas covered by the index. Now this is in no way good news, but more importantly I do not believe it is accurate news.
This index differs from other pricing surveys by looking at repeat sales of the same house which seems like a more accurate way of tracking trends as it does not bring new homes sales into the equation. The problem with this system however, and increasingly more so now, is it does not take in to account the condition of the home and I will explain why that is more important now than ever.
See in June foreclosed homes made up 40% of home sales in San Diego and since the majority of these homes would have a recent sale history they would be used in the index. Now the depreciation would be easy to figure out, but again, the condition of the home being sold in foreclosure would 
be a completely different animal than the home sold 2–5 years ago.
Take the example of this Carlsbad home pictured above that I wrote about here. It sold in December of 2003 for $500,000 and is now back on the market as a REO home that has been foreclosed on. I believe it will sell for somewhere in the low 400’s so not while the close to the 23% reported by Case/ Schiller, certainly a loss. But what is not taken into account is the home has been stripped of all its appliances including the garage door opener, the hot water heater and all kitchen appliances including the garbage disposal. Additionally sinks have been removed, a builtin vanity, plumbing, all the light fixtures, and more. The fences are now falling over, the back fence is gone, molding has been stripped away from the sliders and carpet has been cut out. 
So my question here is, is this depreciation an accurate indicator of the overall real estate market or the damage and cost of a foreclosed home? When buying a used car, mileage and condition are taken into account and should be in this case. If you plugged this theory onto cars, you could say Honda Civics are now worth $6500 based on same car sales which would not be true. Remember 40% of home sales were FORECLOSURES.
This is not a unique situation that I am using to make a point. I have been in foreclosed homes that had actual fungus growing out of the walls because the owner took all the shower fixtures and water was dripping down the interior wall. In past market downturns I have heard stories of owners doing very destructive thigs such as pouring cement in the tolets and sinks to try to ruin the in slab plumbing. In fact one of the main provisions of the Housing Bill that President signed into law yesterday establishes a fund for communities to use to buy and maintain foreclosed properties to try to limit blight.
“As a $4 billion package to help municipalities deal with foreclosure-related blight hangs fire in the US Senate, US mayors met last weekend in Miami to vent about the scourge of abandoned homes. Cash-strapped cities are now scrambling – often using on-the-fly ingenuity – to rescue neighborhoods suddenly vulnerable to crime and stunned by millions of dollars in lost equity wrought by loose credit, opportunistic
speculators, and predatory lending.”
“Some 44.5 million homes in the US now stand next to an empty house, resulting in a drop of at least $5,000 in property value per house. By that calculation, a total loss of home value of $220 billion across the US can be attributed to the vacancy problem.”
“‘This is a man-made disaster that’s had more dramatic impacts on real estate markets than natural disasters [have],’ says Bruce Katz, a housing analyst at the Brookings Institution, a think tank in Washington. ‘In a way, we have a lot of mini-Katrinas across the country.’”– Christian Science Monitor, July 1, 2008
Is the real estate market in the midst of a down turn? Absolutley. Is it as bad as it is being made out? I think not. Sure some areas are getting hit very hard, but I beleive it is more a reflection of the product not the market. For all you buyers that were waiting for prices to come down, now is your time.
| Currently 3 Comments »
Nothing extreme about this foreclosure
July 28th, 2008 Categories: Real Estate News, San Diego County Fixer of the Week, San Diego county Real Estate News
Georgia– Back in 2005, 1800 volunteers and ABC’s Extreme Home Makeover, built the Harper family of Georgia a 4 bedroom 5000+ square foot mansion free of charge. The company, Beazer Construction, also paid off the families mortgage and gave them $100,000.
Well the mansion must not have been enough for the Harpers or the 100k, because the Harpers are now facing foreclosure. Besides the 100K the Harpers took out to separate new loans for $125,000 and $450,000. So their ‘income’ in 3.5 years was a mere $625,000 and now they’re broke.
A foreclosure notice appeared last Friday, a $450,000 second mortgage they took out less than 15 months ago was in default…. Lake City mayor Willie Oswalt was among the 1,800 volunteers helping “Extreme Makeover: Home Edition” build the Harper’s new home 3 ½ years ago. Beazer Homes of Atlanta was the main sponsor. The mayor said he is baffled.
“Beazer gave them $100,000 cash, paid their mortgage off and they still can’t make it,” said Oswalt. Harper told Channel 2
they invested the loan proceeds in a construction business and the business hasn’t been good. She didn’t say how much of the money is left.
“What’s going to happen is instead of keep paying my mortgage, I’m going to take my money and not pay my mortgage because I’m being harassed,” said Harper.– GeorgiaBankrutcyblog.com
As bad as this is, they really did nothing different then millions of homeowners across the nation. House as ATM. Additionally this is not the first home built by the show that has been foreclosed on.
| Currently 2 Comments »
How the housing bill may effect San Diego
July 28th, 2008 Categories: Real Estate News, San Diego County Community News, San Diego County Fixer of the Week, San Diego county Real Estate News
SAN DIEGO– Well congress pulled a weekend session and passed the housing bill intended to buoy our sinking housing market. President Bush has already indicated he would in turn sign this in to law. I have been asked by quite a few people what I thought about the bill over the last several weeks, but have withheld any real opinion until I could read more about it and digest that information. So here are my thoughts.
Probably the real impact of the bill nationwide will be the portion that allows the FHA to insure and help refinance, into fixed rate, some 400,000 loans for homeowners that are in some part of the foreclosure process. Two things here however. The homeowners would have to show that they can indeed afford the payment and the banks would have to accept any loss. The problem I see with this is that most of these homeowners will not be able to afford the new payment especially if 
they got loans based on stated income or had a change in their ‘economic’ picture such as disability, loss of job, taking on more consumer debt, etc. Additionally, there is a clause in the bill that protects lenders from investor lawsuits over loss revenue caused from restructuring loans. This is probably the most beneficial to the consumer group as a whole of this portion.
The 3.9 billion earmarked for buying and or maintaining/ rehabing foreclosed homes will go to companies with government ties so I really don’t see this as being very beneficial to the populous. This will benefit some companies and quite honestly I just see opportunity for abuse. Hopefully the money will go to housing non profits that have a strong history of benefiting the community. Did you read about the Iraq prison in todays paper?
Now the 15 billion earmarked for housing tax breaks will help quite a few with 
a tax credit equal to 10% of the purchase price up to $7500. In order to earn this credit, the home purchase must fall between April 9, 2008 and July 1, 2009. However, from what I have been able to find this is a credit for low income and first time buyers only. Additionally, this credit will have to be paid back in equal payments over 15 years. So this really is 0% loan. Also, as with most everything associated with tax filings there are income restrictions.
What I believe will have the greatest impact on San Diego’s real estate 
market is the provision that makes the increase in the loan amount the FHA can insure permanent. Currently the FHA can insure loans up to $625,000 in high cost market areas. This amount used to be $417,000 and was set to revert back at the end of the year. Why this is important to us, is that the borrower can get a more favorable because of the assurance to cover the loan from the FHA.
| Currently 1 Comment »
San Diego’s foreclosure market
July 24th, 2008 Categories: Real Estate News, San Diego County Community News, San Diego county Real Estate News
SAN DIEGO– The problem with getting two newspapers delivered at home, is my ‘bad’ news comes in two doses. On occasion though, it is interesting how the same situation is portrayed in completely different ways.
This Sunday both the San Diego Union and the North County Times had lead articles about the causes and impact of the foreclosure market.
The San Diego Union states, “This year’s free fall in home values– as much as 40% in some cases– can,
in many cases, be traced to disproportionate share of risky loans doled out”. The paper looked at the ratio of subprime loans to prime loans in the 15 highest deprecating neighborhoods in San Diego. It is worth mentioning that in every zip code however, the percentage of resale homes originating from foreclosure was higher than the percentage of subprime loans. I think the North County Times article may have the answer.
In the North County Times article titled Beyond Subprime, they cited a study by the Federal Reserve with regard to type of loan versus depreciation and their impact on foreclosure. The study states that homeowners whose homes have depreciated more than 20% were 14 times more likely to go into foreclosure, while subprime borrowers were only 6 times more likely to go into forclosure. The study’s conclusion was that depreciation was a 
greater factor in foreclosure than type of borrower.
Thomas Kelly of JPMorgan Chase stated that, “Some people could afford it(the house), but chose not to, and the biggest impact is falling home prices.”-North County Times, July 20,2008
The biggest impact of foreclosures is they continue to drag the market down almost feeding on themselves. It really is a classic ‘domino effect’.
| Currently No Comments »
New lending rules to better protect consumer
July 20th, 2008 Categories: Real Estate News
SAN DIEGO– The Federal Reserve Board approved the final rules intended to
better protect consumers from predatory lending. The new rules are intended to prohibit unfair, abusive or deceptive home mortgage lending practices, which really is what I thought the old rules were for. Additionally, the rules will hold true for all lenders, not just those supervised by the Federal Reserve Board, and should thus create more lender competition benefiting the consumer.
What is deemed as the four key protection factors of these new rules are;
Looking at these as a consumer, being self employed and then as a REALTOR, I see some good but also some bad. First the good.
Prepayment penalties have never been good for the consumer. I understand their purpose and it was only to favor the bank selling loans on the secondary market. It essentially guaranteed a certain amount of interest income to the investor. On initial review, I see this change as a positive, but with adjustable mortgages currently far out of favor in lieu of fixed rate loans, I do not see this having much impact. Additionally, in any transaction I have ever been involved in, I can not remember any prepayment penalty lasting over two years. They should just be banned. All investments are speculative.
Requiring a lender to verify assets and income is a GREAT thing, with one exception. Being self employed I can take advantage of tax laws and it is my PAST tax filings that would be used to verify income. Going forward on a new purchase I could adjust my business practices to make more money available to pay my new mortgage. So while this seems like a very common sense practice, it could hurt consumers such as myself. Asset verification, no problem. We’ll use this provision to transfer in to the bad as it cuts both ways.
Impound accounts will hurt our local consumers. With guidelines having already changed requiring larger down payments, in some cases 15% or more, impounds will only INCREASE the money a consumer needs to close escrow. Currently impound accounts are started with six months worth of funds. On an average priced home in San Diego county of approximately $472,000, that is an increase of approximately $2500 dollars the consumer will need to initiate the impound accounts. My advice, SELLER’S CREDIT to buyer!!! At the close of escrow the seller can contribute 3–6% of the purchase price towards the buyer’s closing costs(there are rules about this), so this is where I would seek that extra money. I am currently involved in a bank owned home transaction and the bank is contributing $10,000 towards the buyer’s closing cost, so this can be done even on foreclosed homes.
And lastly, the ‘it won’t make much difference’ provision. The first provision states that in order to asses a buyer’s ability to repay a loan the lender 
must use the highest payment in the first seven year period. Again, not a whole lot of adjustable loans be used right now, but if they do come back in to favor, the consumer that wants the home will be offered an adjustable loan that is fixed for the first seven years and adjusts AFTER the first seven years. Yes that type of thinking is what contributed to our current real estate market, but hey, it’s the American way.
These new rules take effect October 1, 2009 with the exception of the escrow rule changes which are suppose to phase in during 2010.
To read the entire Federal Reserve Board press release, you can go here.
| Currently 1 Comment »
The journey of one Carlsbad home
July 18th, 2008 Categories: Real Estate News, San Diego County Community News
SAN DIEGO– This is the story of one home, one buyer and graphic illustration of the current San Diego housing market.
This 3 bedroom 1563 square foot Chestnut Street home was last sold in December 2003 for $500,000 with the buyer financing $450,000. If the story ended here, everything would be great. It doesn’t and I believe this is why this home and many others have ended up in the bank’s hands.
The buyer, within 60 days took out what was most likely a HELOC or home equity line of credit of $270,000. That $500,000 home just became a 
$720,000 liability. It does look as though there were some improvements done on the home and on August 9th of 2005 the home was listed in the MLS. After 93 days with a listing price of $749,000 to $849,000 the first listing period expired. It immediately went back on the market at same price for an additional 114 days.
In this two year timeframe, this area of the Carlsbad housing market saw an increase in values of approximately 20%. The average selling price in 2003 
was $546,573 and in 2005 was $656,000. Unfortunately the homeowner was looking for almost a 70% premium at the high end of their range.
In January of 2008, the home came back on the market as a short sale. It was listed at $549,000 to $649,000. After 178 on the market, the bank has auctioned the property. I will up date this article as soon as I know the price.
What this illustrates to me and should to you, is the fact that many homebuyers looked to their homes as more than homes. In general with regard to the current real estate market, we have only each other to look at. When one wakes up with a hangover, you generally don’t blame the bar. Instead you question why you drank so much. It was the over exuberance of false wealth that fueled lifestyles and our economy. The banks only filled glass. 
Had this particular owner not squandered what equates to over 50% of the market value of the home, they would still own their own 3 bedroom with a view slice of paradise less than mile from the beach. Additionally, they would be sitting on approximately a 17% appreciation to date.
Only 20 years ago, the U.S.’s total outstanding mortgage debt made up roughly 30% of our GDP. Homeowners held large stakes in their houses – close to 70% of the equity on average. Today, mortgage debt equals nearly 80% of GDP. The average homeowner owns less than half the equity in his home. This seismic change in the nature of home ownership and debt financing occurred nearly overnight – in less than one generation.– Seeking Alpha, 7/18/2008
| Currently No Comments »
How to avoid a rental scam
July 15th, 2008 Categories: Real Estate News, San Diego County Fixer of the Week
SAN DIEGO– Two Orange County men were arrested over the weekend for renting vacant homes that did not belong to them. This is not the first time this has happened either.
Back in August of 2007 two men were essentially doing the same thing. The homes which were for sale at the time and vacant, would be placed on CRAIGSLIST and then the men would collect rent and a deposit, in some cases from multiple people on the same homes. The homes used were in La Jolla, Crown Point and pacific Beach. The men were set up by 10News I-team and were eventually caught, tried and convicted of one count of conspiracy and two counts of grand theft.
This time around, the only real difference in the scam were the homes were 
in foreclosure. Again, the men placed an ad in CRAIGSLIST. They then broke into the homes in order to have access.
It was a stroke of bad luck though that doomed these two.
When the first ‘tenant’ went to put the utilities in to their name they were told the home was in foreclosure. Realizing they had been burned, they posted an ‘alert’ in CRAIGSLIST and received a response from a couple that was to meet the ‘landlords’ on a different home, but same type ad. Carlsbad police were alerted and the men were apprehended at the home.
HOW TO AVOID THE RENTAL SCAM
Probably the only real way to be certain you know who owns the home is to to have a REALTOR, you can use me, look up the property in the MLS and in the tax rolls to see where the ownership resides at that time. You will then have a valuable unsolicited piece of information.
Additionally, ask for an ID from the ‘landlord’. In 2007, one of the potential tenants asked for ID from the landlord and was told he had forgotten it. While he did say it made him feel uncomfortable, he went through with the deal.
Another victim, Ben Taley, told 10News, “The guy was being kind of shady. Once I gave him the deposit, I asked for his license information. He said he didn’t have it on him and I said I didn’t feel comfortable. He got kind of awkward.” 10news.com, UPDATED: 10:47 am PDT August 24, 2007
I would also suggest, asking them for the name of the previous tenants and their rental and ownership history. If they struggle with this information, that should be another huge signal.
Lastly, if you are not feeling quite secure, go knock on a neighbor’s door. Neighbors are ALWAYS a great source of information. If the house is on foreclosure or the For Sale sign disappeared from the front yard a couple days ago,they’ll know and will gladly tell you.
| Currently 1 Comment »
Housing affordabiltity rate nearly doubles for San Diego
July 10th, 2008 Categories: Real Estate News, San Diego County Community News
SAN DIEGO– Now that’s a headline I would like to see grace the pages of a major periodical. It’s true, the affordability rate in June 2007 was 14% and has increased to 27% this June. The unfortunate reason for this if you are a home seller or owner is the decrease in housing values.
Now if you have been sitting on the fence waiting to get in to the market this is great news for you. While not at the bottom, we are darn close forgoing major changes to the other economic factors. Mortgage rates are still low and there are some great properties, so this could be your time.
| Currently 1 Comment »
Carlsbad triathlon course preview
July 8th, 2008 Categories: Real Estate News, San Diego County Triathlon Race Reports, Triathlon Club of San Diego Race Reports, What to do in San Diego
CARLSBAD– The 27th annual Carlsbad Triathlon will be taking place this weekend on July 13th. This race is in the top 3 of the longest consecutive running triathlons in the country.
I went out yesterday and shot a few clips identifying some key points of the bike course and run course. The swim course is pretty self explanatory and offers no real surprises. The surf and tides forecast for the weekend call for light surf and the tide will be high at the start of the race. The main thing to remember with the swim for athletes new to the ocean is to TRY to relax. The ocean is a great medium to swim in so make it your friend!!!
The first thing you are going to face coming out of the swim and leaving T1 is the hill that will take you out of the Tamarack state beach parking lot to the coast highway. You need to make sure you have selected a proper gear prior to the race as mounting at the base you will not have time to build any speed. I have seem people almost crash struggling to get up this hill.
Next out on the bike course, you will find a pretty flat nice road. Just south of Palomar Airport Road you will find the only ‘hill’ on the course. It is at the Encinas creek crossing just before the campground. While it is short, it will put a hamper on your effort so be prepared to hit this hill twice. Once on the way out and then on your second lap. One nice thing through this stretch is the city has 
repaved what used to be a very bad road.
Remember this is a two lap bike course. Your first turn around comes at La Costa Avenue just after crossing the Aqua Hedionda lagoon jetty. Remember to use caution as you move over from the right lane to the center divide to make your ‘U’ turn. There will definitely be some fast riders coming up and diving into that turn. Once you have made your turn try to get over to the right as soon as you can to allow others to pass.
The second ‘U’ turn comes at Solamar Drive which comes about 2/3 of the way back to the transition. It is just south of Palomar Airport road. If you were to look at the course on a map, it is a paper clip. When you approach this turn you will need to move in to the left traffic lane, again carefully, as the right traffic lane is reserved for the cyclists heading back for T2.
The run course is also pretty flat with a turnaround almost even with the smokestack of the power plant. The biggest thing to keep in mind with the run course is you leave T2 on the flat boardwalk. At the end of the boardwalk the course goes up a 
short steep rise at Pine Avenue. While this is short it will certainly spike your heart rate as you are already coming out of T2 with some anxiety, urgency, anticipation and an elevated heart rate as it is. If you have spectators coming to the race, the best place to spectate for the run is at the top of this little rise as you will be going pretty slow and they can identify you coming up the hill. From there they can easily get to the finish to see you cross.
Have a great race!!!
| Currently No Comments »
San Diego short seller stick it to the bank one last time
July 5th, 2008 Categories: San Diego county Real Estate News
SAN DIEGO– I have been experiencing a trend that really does not benefit anyone. Homeowners, especially those selling because of financial crisis, are making it very difficult to show their homes. Here is the most 
recent example I am dealing with from a home in La Jolla where the owner is a real estate agent.`This home is listed for $750,000 and has approximately 1.05 million loaned against it.
Short Sale and commissions subject to lender approval. Any reduction in commissions ———————. First showing July 3rd 12-2PM, NO OTHER TIMES. Do Not Disturb any other time. Fax offers to (800) #$%-&*^%. Seller is licensed Real Estate Agent.
I have been trying now for two days to get in to this home with no return calls.
Now I can appreciate that it must be a very disturbing thing to go through, having helped homeowners with sort sales, but many times it seems these transaction are a case of lack of financial restraint, refinancing and using equity, or plain irresponsibility.
Here is an explanation from Channel 10news on why a homeowner is short selling his home. He bought it with 0% down and has owned it since March 2007.
“Now I have a house with a payment that’s very, very high …,” said homeowner Corey Goldstein.
Goldstein bought a condo in University City last year, and now it is worth significantly less.
“I paid $500,000 for it and it’s worth 30 percent less,” said Goldstein. “It was actually the worst investment I ever made in my life.”
He hasn’t missed a payment yet, but Goldstein has chosen to cut his losses and put his condo up as a short sale.
“I’ve got to do something because I can’t deal with it anymore. I can’t make it anymore, I don’t want to handle it anymore,” said Goldstein. 10news.com, 5:48 pm PDT July 3, 2008
The reality here is that the homeowner has NO LOSS as he has no money 
invested in the house. It’s the bank that’s taking the loss. There is not a mention of job loss, disability or other life change impacting finances. It appears simply that this homeowner is abandoning his responsibility simply because of a declining market.
If you are short selling your home, do everyone a favor, make it available to be shown. This tactic does not effect the bank one bit.
| Currently No Comments »
